The European Commission has published a summary of
the 38 responses it received to a call for evidence regarding the functioning in
EU Member States of private placement regimes (IP/07/523).
Under private placement securities can be sold privately to expert investors
without triggering rules on investor protection, reporting and disclosures that
apply when instruments are sold to the retail public. Respondents recognise
serious problems in the cross-border distribution of some types of investment
products, in particular non-harmonised investment funds. Respondents note that
the arrangements established under the Prospectus Directive work well for
securities and closed-end funds. Responses suggest that these arrangements
should be extended to non-harmonised open-ended funds – such as
institutional funds and hedge funds. The responses represent a valuable input to
the Commission's assessment on the need and potential options for a European
private placement regime scheduled for spring 2008.

Internal Market and Services Commissioner Charlie McCreevy said:
"Effective private placement arrangements are a common feature of most
developed financial systems around the world. Private placement rules allow
seasoned market participants to buy and sell financial instruments without the
full weight of regulatory burdens that apply when selling to the retail public.
In Europe, we have no equivalent. We have a patchwork of national rules which
are often mutually incompatible. This call for evidence confirms views of market
players that a common understanding could bring benefits to the EU financial
markets. But there are still many unanswered questions. We need to do further
work on this – also with regulators and investors – to get a better
sense of the best way forward."

38 reactions were received – almost exclusively from individual
financial institutions (20%) or their respective associations at national (35%),
European (40%) or international level. Only two responses were received from
national authorities or supervisors. Responses were received from organisations
in 11 Member States as well as from EU, US and international organisations.

Problems are particularly acute for (non-harmonised) open-ended investment
funds which do not benefit from 'passporting opportunities' provided by the
Prospectus Directive to securities and closed-end funds. Most respondents report
that these latter arrangements work reasonably well. Many respondents urge the
Commission to concentrate on replicating similar arrangements for
(non-harmonised) open-ended funds. Any EU level arrangements should complement
– but not over-ride or interfere with – more liberal existing EU and
national regimes.

Beyond this, there are considerable differences of view on the design of a
European private placement regime. Views diverge widely about the definition of
eligible investors, the eligibility of third country providers or the types of
public offer rules that should be relaxed under such a framework. Public
authorities and supervisors have yet to engage with this work in a meaningful
way.

The Commission will continue to analyse the scope, costs and benefits of
possible action, and to test possible options with stakeholders. On the basis of
this further work, the Commission will reach a view of whether EU level work on
this topic is warranted and the most promising options for making
progress.The summary document as well as the individual responses, if
authorised, can be accessed via the following link: